53 STAT.] 76TH CONG. , 1ST SESS.- CH. 247-JUNE 29, 1939 SEC. 211 . NET OPERATING LOSSES. (a) Section 23 of the Internal Revenue Code (relating to deduc- tions from gross income) is amended by inserting at the end thereof the following: "(s) NET OPERATING Loss DEDUCTION.- For any taxable year be- ginning after December 31, 1939, the net operating loss deduction computed under section 122." (b) The Internal Revenue Code is amended by inserting after sec- tion 121 the following new section: 867 Deductions from gross income. Ante, p. 12. I. R. C. §23. Net operating loss deduction. Ante, p. 56. "SEC. 122 . NET OPERATING LOSS DEDUCTION. "(a) DEFINITION OF NET OPERATING Loss. - As used in this section, o"Net od the term 'net operating loss' means the excess of the deductions allowed by this chapter over the gross income, with the exceptions and limitations provided in subsection (d). "(b) AMoUNT OF CARRY-OVER.-T he term 'net operating loss carry- over. °nt over' means in the case of any taxable year the sum of: "(1) The amount, if any, of the net operating loss for the first preceding taxable year; and "(2) The amount of the net operating loss, if any, for the second preceding taxable year reduced by the excess, if any, of the net income (computed with the exceptions and limitations provided in subsection (d) (1), (2), (3), and (4)) for the first preceding taxable year over the net operating loss for the third preceding taxable year. "(c) AMOUNT OF NET OPERATING Loss DErUrcmoN.- The amount of Amount o the net operating loss deduction shall be the amount of the net operat- tion. ing loss carry-over reduced by the amount, if any, by which the net income (computed with the exceptions and limitations provided in subsection (d) (1), (2), (3), and (4)) exceeds, in the case of a taxpayer other than a corporation, the net income (computed with- out such deduction), or, in the case of a corporation, the normal-tax net income (computed without such deduction); "(d) EXCEPTIONS AND LIMITATIONS.- The exceptions and limita- itExctions tions referred to in subsections (a), (b), and (c) shall be as follows: "(1) The deduction for depletion shall not exceed the amount. Deletion" which would be allowable if computed without reference to dis- covery value or to percentage depletion under section 114 (b) I1ntR. 45 (2), (3), or (4); (2),(3),(4). "(2) There shall be included in computing gross income the interest. amount of interest received which is wholly exempt from the taxes imposed by this chapter, decreased by the amount of in- terest paid or accrued which is not allowed as a deduction by section 23 (b), relating to interest on indebtedness incurred or AIte, p. § continued to purchase or carry certain tax-exempt obligations; "(3) No net operating loss deduction shall be allowed; loss deduc "(4) Long-term capital gains and long-term capital losses lowed. shall be taken into account without regard to the provisions of gainsndls section 117 (b). As so computed the amount deductible on IAnRC 5 account of long-term capital losses shall not exceed the amount includible on account of the long-term capital gains, and the amount deductible on account of short-term capital losses shall not exceed the amount includible on account of the short-term capital gains; erating of carry- f net op- s deduc- and lirn- § 114 (b) 3 (b). operating otion al- capital ises. 11i7 (b).